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The Future of Defined-Benefit Pension Plans: Insights for Trade Unions and Policy Advocates

This presentation to the Canadian Institute of Actuaries discusses the evolving landscape of defined-benefit (DB) and defined-contribution (DC) pension plans in Canada. It highlights the critical role of trade unions in bargaining benefits, administering plans, and advocating for policy changes. Key topics include the pressures facing DB plans, such as regulatory challenges and demographic shifts, as well as potential mitigations like hybrid plans and cost-sharing. Ultimately, the analysis suggests that while DB plans face challenges, their potential is not yet extinguished, indicating possible advancements in the future.

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The Future of Defined-Benefit Pension Plans: Insights for Trade Unions and Policy Advocates

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  1. Canadian Labour Congress Department of Social and Economic Policy Bob Baldwin, National Director bbaldwin@clc-ctc.ca C4-PD www.clc-ctc.ca cope/sepb 225

  2. The Future of Defined-Benefit Pension Plans Presentation to the Canadian Institute of Actuaries November 17-18, 2004 Montreal, Quebec

  3. Role of Trade Unions • Bargain benefits • Serve as (joint) administrators • Policy advocates

  4. Coverage and Preferences of Trade Unionists • Coverage overall (80 vs. 35) • small business (70 vs. 15) • Preference hierarchy • defined benefit • MEPP (contingent benefit) • defined contribution

  5. Canada’s Recent Experience with DB and DC Plans • Important change in the relative size of DB and DC membership • Note: largely corporate sector • Note: context of overall decline in plans and decline in member/employed person ratio

  6. Pressures Against DB Plans • Longer term • Regulatory (and tax environment) • International (policy) developments • Limitations of DB plans (as we know them) • Slack labour markets • Changing composition of employment • More recent • Surplus conflicts • DB financing problems

  7. Mitigating Developments(current and prospective) • Union (plan member) pressure • Experience with DC • High administration costs • Unpredictable benefits and retirement ages • Problems recruiting older workers • New Hybrids • DC with DB guarantees • Explicit cost-sharing • CAP Guidelines (new world of DC?)

  8. Hopeful DB Developments • Less irrational exuberance • Greater clarity about financing (risk-sharing) • Overcoming DB limitations

  9. Conclusion • Rumours of DB death are probably exaggerated • Hybrids, including MEPPs, may become more important

  10. Canadian Labour Congress2841 Riverside DriveOttawa, ON K1V 8X7(613) 521-3400www.clc-ctc.ca

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